JPMorgan Chase (JPM) is first up in a browbeaten line of banking-sector earnings results that Wall Street analysts say will be among the worst in nearly five years and the sorriest among the 10 S&P 500 (SPX) sectors. Will what happens at JPM stay at JPM?
Probably not, considering the tenor on the Street and in the markets, many analysts say. JPM, the largest (by assets) among the nation’s big banks, will paint the first brush of the sector’s earnings picture when it reports before the bell Wednesday. Banks have been battered by persistently low interest rates, a hard-hitting regulatory environment and the collapse in the energy markets. The sector has been the worst-performing on the SPX, down 8% while the index is clawing to stay in positive territory. Earnings overall in the sector are forecast to tumble 9.2% while sales are expected to barely inch up by 0.02%, according to analysts reporting to Thomson Reuters.
And What About Interest Rates?
What could be more interesting than the results are the forward-looking statements analysts say they will be listening for on the JPM conference call. Will Chief Executive Jamie Dimon have an upbeat forecast for Q2 and the rest of the year? What do he and his JPM cohorts, with their fingers on the pulse of business and interest rates every day, think about the future of the Federal funds rate?
Analysts have been pushing down earnings expectations the entire quarter, and at last glance, they were sitting at a per-share profit of $1.26, a deeper-than 13% drop from the year-ago period. On the sales front, the top line is projected to retreat about 1.6% to $24.8 billion.
Short-term options traders have priced in a potential 2.3% share price move in either direction around the earnings release, according to the Market Maker Move indicator on the thinkorswim® platform from TD Ameritrade.
Going into earnings, the 60-strike call lines were busy as were the 57½-strike put lines, with activity stepping up by two times the normal amount of calls and puts on Monday. Implied volatility is sitting very low at the 29th percentile. (Please remember past performance is no guarantee of future results.)
Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price and over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.